Demolition Spotlight // Southwest Region

Onward & upward?

Every year brings with it new opportunities and challenges for demolition contractors and construction and demolition (C&D) recyclers. 2018 is no different. Construction & Demolition Recycling, a sister publication to Recycling Today, talked with three companies in the Southwest region of the U.S. about how shifting market conditions affected their businesses last year and what their perceptions are heading into 2018.

DEALING WITH THE CHALLENGES

John Sacco, president, Sierra Recycling & Demolition, Bakersfield, California, says one of the biggest hurdles his business had to deal with over the last year has been shifting commodity prices brought about by fluctuating demand.

“The metals industry in 2017 saw a nice commodity price increase, so that was the good side of things,” Sacco says.

He continues, “Plastics recycling was bad, and the mixed paper and cardboard markets were hurt because of Chinese regulations.”

Jason Tankersley, CEO of The Fairfax Cos., owner of the Speedway Recycling & Landfill Facility in Tucson, Arizona, echoes similar sentiments. “Markets have become extremely challenging with respect to recycling,” he says.

“With China’s Green Fence and National Sword policies, plastic and paper markets have been decimated,” Tankersley continues. “We have not been able to move any of our sorted plastics in months. No mixed paper is selling, and the cardboard market prices are staying relatively low.”

He adds, “Ferrous and nonferrous metals are also maintaining low price points.”

Tillio Olcese, president of Olcese Waste Services, Carson City, Nevada, says competition and issues with obtaining financing are two factors contributing to slow business in the region.

“Owners are not pulling the trigger on projects, especially bigger ones,” he says. “Financing was one of the main reasons projects were not moving forward.”

Olcese continues, “Also, stiff competition in the demolition industry did not help 2017 numbers. Now, people with a backhoe are all of a sudden full-service demo contractors.”

MANAGING the EMPLOYEE SHORTAGE

On top of economic and market challenges affecting the region, Tankersley says his business has faced challenges finding qualified employees for some positions. Because of the strength of the construction market, he says, maintaining the company’s equipment has become especially challenging as there is a shortage of qualified skilled mechanics and drivers.

This amplified demand also has resulted in a rise in wages for these positions.

Conversely, the lack of demand for plastics and paper scrap has resulted in his company reducing its sorting labor because Speedway Recycling has stopped sorting these materials from its incoming material stream. The company is currently recovering and sorting cardboard and metals.

“For our business and for related industries, you have to be able to hire people who can pass prework physicals and drug screening. That, for whatever reason, has always been a problem in our area,” Sacco says. “Finding quality people has been a challenge for years, and I don’t think this last year was any different.”

This dearth of qualified available job applicants has placed an added emphasis on companies being able to retain their existing employees, which is something Cherry Cos. strives for as a family business, Rizzo says.

“Finding the right personnel in some regions has always been a challenge,” he adds. “However, Cherry started as a family business, and that culture still remains today. We promote from within when the opportunity arises from our great pool of employees.”

Rizzo continues, “In addition, the down market in oil has provided some new candidates for personnel.”

Southwest Regional Snapshot

Supply and demand factors: Hurricane activity along the Gulf Coast and wildfires in California will require industry participants to aid in the cleanup effort.

Commodity trend: China’s Green Fence and National Sword policies have hurt plastic and paper markets. Ferrous and nonferrous metals prices are not as robust as some sources would like.

GOING GREEN?

Green building and associated certification systems, such as the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED), have long been trending topics in construction circles. However, economic realities have tempered their impact when it comes to C&D recycling, even in more progressive states like California.

“California is on the forefront of regulation that sound goods, but the process of being able to recycle has become more difficult due to all the different regulations,” Sacco says.

For example, regulators place extra scrutiny on recyclers’ management of airborne particles and stormwater.

“The ramifications of green building on the actual recycler is just getting to be too much,” Sacco continues. “It is so burdensome that being profitable has become difficult.”

Olcese says the higher costs associated with green building also made it impractical for developers in his region.

“We have seen very little, if any, green building/LEED work in the region for private projects,” Olcese says. “This is the bottom-line issue with developers saving money. We have seen some LEED projects on the federal level; however, they are few and far between. In our experience, this really runs up the price tag substantially.”

Rizzo says Cherry Cos. participates in a number of LEED programs and, because the company is a recycler of concrete, asphalt and steel, it is able to achieve waste diversion rates of 90 to 95 percent regularly.

However, the area’s inexpensive landfills have made it impractical to participate in some green building and LEED certification programs, he adds.

Tankersley says green building initiatives aren’t a major part of the business landscape in Tucson. “I have not noticed a big difference in the green building industry here in Tucson,” he says. “I am on the Southern Arizona Home Builders (SAHBA) Green Build Committee, and we have seen little interest by the larger homebuilders in participation.

“With stricter energy use standards being legislated, it seems there has been a move away from the need to label things LEED or green,” Tankersley continues. “However, I see some of the smaller construction companies trying to market to that niche.”

To recapture some of the company’s lost volume that its recycling facility suffered when a local municipality discounted its tipping fees, Tankersley’s company started its own roll-off division, Tank’s Roll-Off and Recycling. This new business, specializing in green and wood wastes, works to appeal to the consumer who cares about sustainability, he says.

“By all leading indicators, based on the national forecast of an economy boost in 2018, we anticipate an increase in the upcoming year.” – Joe Rizzo, Cherry Cos., Houston

LOOKING FOR OPPORTUNITIES

The companies profiled in 2017 for the Southwest Regional Spotlight article, “The light at the end of the tunnel,”were cautiously optimistic that the rebounding economy, new presidential administration and a boost in C&D recycling volume would spell good things for the year to come.

Although the variables affecting the market subdued many companies’ revenues in 2017, there is reason to believe a rebound could occur in 2018, sources say.

“By all leading indicators, based on the national forecast of an economy boost in 2018, we anticipate an increase in the upcoming year,” Rizzo says. “With oil prices continuing to show strength, the continued client-based education for recycling, increased public dollar money and the labor shortage lessening [in some segments], we anticipate great things in 2018.”

He continues, “Challenges to overcome in this upcoming year will be the stabilization of businesses affected by the devastating impact of Hurricane Harvey.”

Just as cleanup efforts from Hurricane Harvey figure to play a prominent role along the Gulf Coast in 2018, so do those associated with the wildfires that ravaged California throughout 2017.

Sacco says he is confident the economy will improve in 2018, but he also questions how the state’s regulations surrounding fire cleanup efforts might affect their progress.

“The challenge for our state is always going to be dealing with the regulations that come along with progress,” he says.

“For example, is some of this cleanup material going to be labeled hazardous waste, and, if so, who is going to be able to handle it?”

Another factor is the timing of the rebuilding. “A big question is going to be how quickly [homeowners will be able] to get permits to rebuild?” Sacco says.

Tankersley shares a sense of optimism going into 2018. However, he also acknowledges the key to growth lies in his company’s ability to cater to shifting regional trends.

“2018 is promising to be a better year than the previous two,” he says.

“Tucson has had several Fortune 500 companies agree to move into our market and establish headquarters here—one being Caterpillar. The biggest opportunity is also our biggest challenge: competing with the cheap tipping fees [offered in our region] while gaining market share by appealing to those who truly care about what happens to their waste.”

Tankersley adds, “Finding uses for waste is what we do, and we will just need to try harder to find a beneficial use for all this stuff.”

The author is the editor of Construction & Demolition Recycling, a publication of the Recycling Today Media Group. He can be reached at aredling@gie.net. This article first ran in the January/February 2018 edition of that publication.